The single currency has taken another knock down to a low of 1.2758 following the ECB rumours but we still remain in a short term upward trend in October.
EUR/USD H4 chart 21 10 2014
The lower end of this short term channel is around 1.2743 and we have the 55 h4 ma just under there at 1.2732.
The market has taken the news as a prospect of the ECB ramping up support for the economy and stocks are up on their highs for the day. Corporate QE is music to stocks. It’s two fold for the currency as obviously it’s a further sign of ECB pumping but also a lot of that cash is going to be hit by negative interest deposit rates in Europe. That could mean that firms look to move the funds elsewhere and that will mean out of Europe, which is probably something they are doing anyway. Either way it’s negative for the euro.
If you can’t beat ‘em, join ‘em as GBPUSD now takes out the 1.6150 support/bids with EURUSD still falling as EURGBP holds around 0.7900 ( see my previous post) with a low of 0.7897 before turning up to 0.7905
Stops triggered to 1.6144. Currently 1.6152 again with more bids noted at 1.6125-30
The current wave of euro selling on ECB corp bond purchases means it all about-turn again for this pair having failed ahead of the 0.7950 offers earlier that I highlighted
Now it’s time to test the bids between 0.7900-10 which have survived a couple of attacks so far in recent sessions. Previous support at 0.7895 and more buyers behind that into 0.7880
Probably worth a buy into 0.7900 ( low so far 0.7905) with a tight-ish stop given that GBPUSD also has offers around 1.6180-85. Currently finding a few buyers to 1.6170 on the EURGBP dip.
EURUSD currently 1.2788 and falling
EURGBP H4 & orders 21 Oct
The euro has fallen on a report from Reuters that the ECB is considering buying corporate bonds on the secondary market.
- ECB work on buying corp bonds is already well underway but many issues still undecided
- ECB may discuss corp bond buys as early as December and may decide to go ahead and begin in Q1 2015
- Reuters cites “several sources familiar with the situation”
An ECB spokesman has come out and said that “The governing council has taken no such decision”. They may not have taken a decision but he/she hasn’t dismissed that it could happen.
Corporate bond buying has been on the table but it faces the same problems of who and what to buy. At the moment the ECB has started ABS in France and Spain. It’s one stage down from stepping into sovereign bond buying. If we ever get that mentioned by sources, the euro will tank.
The full story from Reuters:
The ECB has already carried out work on corporate bond buying, which would widen out the private-sector asset-buying program it began on Monday. It is hoping these measures will foster lending to businesses and thereby support the euro zone economy.
“The pressure in this direction is high,” said one person familiar with the work inside the ECB, speaking on condition of anonymity.
China faces a financial squeeze and stress point at the end of the year as local governments have around 40% of total debt and guarantees maturing. To calm this China’s finance minister is just out on the wires saying that they may allow government to issue new bonds to replace some of the current debt. A draft document says that a grace period will be given for governments to use existing funding channels until the end of 2015.
China’s local governments have been investing into construction and other infrastructure but have increased the amount of unregulated local government financing vehicles (LGFV’s) Total borrowing was up to around $2.9tn to the end of June 2013.
The Chinese government want to bring this and borrowing under control and so are open to the risks they face towards the end of the year.
- EU area and EU 28 govt deficit at 2.9% and 3.2% of GDP respectively
Eurostat have just published their first detailed report on govt deficit and debt figures for 2010-2013 based on ESA 2010
Full report here. Happy reading ( let me know what you think.. I’m off to make a cup of tea)
EURUSD 1.2815 amidst some euro selling overall EURGBP 0.7922 EURJPY 136.58
EU area & EU28 govt deficit table 2010-2013
- Low rates are entirely appropriate
- Low rates encouraging investors to search for yield
- Low rates without pick up in real investment creates potential for new risks
- Monetary policy has limits when it comes to improving investment climate
- Very low global rates to persist for some time yet
RBA deputy governor Philip Lowe speaking at a conference about “Investing in a low interest rate world”, something a lot of people should probably get used to.
AUD/USD falls 6 pips below 0.8800 as Lowe makes clear that rates aren’t going up anytime soon in his corner of the world.
Philip Lowe gives a back hand slap to rate rises
News just in sending Oscar Pistorius to jail for five years for killing his girlfriend Reeva Steenkamp in Feb last year
Judge Masipa began reading the sentence by saying that, although she had been aided by assessors, the decision was hers and hers alone.
Sentencing is about achieving the right balance. Sentencing is not a perfect exercise.
She also gave Pistorius a three-year suspended sentence for a firearms charge.The prosecution had called for a minimum 10-year sentence; the defence for community service and house arrest.
He will need to serve at least 1/6th of the 5 year term before being considered for home detention
Pistorius gets a 5 year jail term
More detail to follow
- CAO cuts output assessment saying ” industrial production is decreasing recently” in reaction to the jump in demand prior to April’s sales-tax increase
- “private consumption appears to be pausing recently” as does the improvement in corp profits
- CAO says economy is expected to recover ” although weakness remains for the time being”
- risk inc a protracted reaction to the tax rise and slowdowns in overseas economies
The review echoes previous comments on output by Kuroda
USDJPY 106.61 after the repeated reality check
- Prior 10.883bn. Revised to 11.0bn
- Ex financials/banks 11.83bn vs 10.5bn exp m/m. Prior 11.6bn. Revised to 11.7bn
- PSNCR 17.7bn vs 1.583bn prior m/m. Revised to 1.939bn
- Central government NCR 21.7bn vs 3.1bn prior
- PSND ex-banks 1.4513tn or 79.9% of GDP, matches highest on record
Over the last 6 months government borrowing is up over 10% on last year. The borrowing numbers shoot to bits the coalitions plans to eliminate the deficit by 2015. The government blame the extra borrowing on “an uneven pattern in tax receipts in 2013″. Last week the head of the budget watchdog said that there was a big problem with low tax receipts being seen despite the increase in employment. Income tax revenue was 2.3% higher than a year ago.
Higher borrowing isn’t a shock to many and I don’t think an army of accountants could unravel the underlying numbers between the ONS reworking the calculations from last month and the governments crap about patterns in tax receipts. The long and short is that borrowing is up, the government is a million miles away from fixing it and no one really has a clue what is going on. Watch these numbers start to become even more of a political stick with the upcoming elections next year.
Cable sits at 1.6160
UK PSNB 21 10 2014
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